56.74% ROCE, 46.26% ROE: IRCTC, RITES, RVNL, 2 Other Railway Stocks To Watch Out Ahead Of Ram Temple Ceremony

Less than a week is left for the much-awaited ceremony of Ram Mandir in the heart of Ayodhya. On January 22, a historic moment is going to be set as Prime Minister Narendra Modi will be inaugurating Ram Lalla's temple. Ahead of this auspicious occasion, railway stocks have been on bull rides, hitting back-to-back new highs and giving double-digit returns. There are five railway stocks which have been in focus and have high ROCE and ROE which are among key metrics to measure the potential of equity shares.

Three out of five of these top 5 railway stocks with high ROCE and ROE, are multibaggers!

IRCTC:

Indian Railways catering services provider, IRCTC has been a rising star since last year. The stock price has jumped by 46% in a year. As per ICICI Direct data, IRCTC has an ROCE of 56.74% and an ROE of 46.26%.

Currently, IRCTC shares are at Rs 934.55 apiece.

Founded in September 1999, this Miniratna company is an extended arm of the Indian Railways to upgrade, professionalize and manage the catering and hospitality services at stations, on trains and other locations and to promote domestic and international tourism through the development of budget hotels, special tour packages, information & commercial publicity and global reservation systems.

Rail Vikas Nigam (RVNL):

As per the brokerage, RVNL has an ROCE of 17.22% and an ROE of 20.81%. So far in January 2024, RVNL shares have risen by a whopping 32%. The stock even touched a new 52-week high of Rs 245.95 apiece on BSE on January 17. In a year, the stock is a multi-bagger with an upside of a massive 208%.

RVNL works as the construction arm of the Ministry of Railways for project implementation and transportation infrastructure development. The organization undertakes project execution from concept to commissioning and creates project-specific SPVs.

RITES:

With nearly a five-decade journey, RITES has established itself as a preferred choice for clients in more than 55 countries across Asia, Africa, Latin America, and the Middle East regions. The company is the export arm of Indian Railways for providing rolling stock (including locomotives, coaches, trainsets etc.).

In a year, RITES shares have zoomed by 57% on BSE. Currently, the stock is at Rs 533.20. As per the brokerage, RITES has an ROCE of 28.31% and an ROE of 22.42%.

Titagarh Rail Systems:

Next up is Titagarh Rail Systems formerly known as Titagarh Wagons. The company is engaged in producing railway castings such as bogies and couplers for the Indian railways. The company also caters to passenger rolling stock including trains and metros as well. They also participated in India's Semi high-speed train project, "Vande Bharat," aligning with policies like 'Make In India' and 'Atmanirbhar Bharat.'

As per the brokerage, Titagarh has an ROCE of 16.82% and its ROE is to the tune of 13.93% as of now. Currently, Titagarh's share is at Rs 1,079 apiece. In a year, the stock has jumped by a huge 390%.

IRCON International:

Lastly, government-backed IRCON focuses on the construction of roads, bridges, railways, airports, airport runways, and residential, industrial, and commercial buildings. It also provides services such as railway electrification, leasing of locomotives and passenger cars, and signals and telecommunications installations.

In a year, IRCON shares soared by 238% on BSE. The stock touched a new 52-week high of Rs 212.95 apiece on January 17. As per the brokerage, the ROCE and ROE are at 12.95% and 15.5% respectively for IRCON.

Why ROCE and ROE are important for equity shares?

As per Motilal Oswal's website, Return on Equity (ROE) is important as it tells investors that the money that is being ploughed back into the company is still earning a healthy return. There are two ways in which the company treats its profits. Firstly, it pays out dividends to shareholders, which is equivalent to partially extinguishing the wealth of the company. The second method is to plough back the funds for internal use. If a company ploughs back profits rather than paying out as dividends, it needs to justify this decision with an attractive ROE.

Accordingly, ROE not only measures what the business is residually generating for shareholders but it also measures whether the company is wisely using the profits ploughed back into the business.

Meanwhile, on ROCE, Motilal explained that ROCE is the ratio of the operating profits of a company to its total capital employed. The factor of return on capital employed is especially crucial while making comparisons of the performance of organisations in sectors which are capital-intensive, such as telecom and utilities. This is due to the fact that, unlike fundamentals of any other kind like ROE (return on equity), which only evaluates profitability linked to an organisation's shareholders' stock, the ROCE analyzes equity and debt.

In conclusion, ROE is more useful from a shareholder point of view and from the point of view of determining the trajectory of the P/E Ratio. But ROCE is more useful if you look at the business as a whole, as per Motilal.

Railway projects to transform Ayodhya amidst Ram Mandir:

PM Narendra Modi inaugurated the redeveloped Ayodhya Railway Station and flagged off new Amrit Bharat trains and Vande Bharat trains. He also dedicated several other railway projects to the nation.

The redeveloped Ayodhya Railway Station - known as Ayodhya Dham Junction Railway Station, will have a cost of over Rs 240 crore. The station building will be 'accessible for all' and 'IGBC certified green station building'

Also, PM Modi flagged off two new Amrit Bharat trains viz Darbhanga-Ayodhya-Anand Vihar Terminal Amrit Bharat Express and Malda Town-Sir M. Visvesvaraya Terminus (Bengaluru) Amrit Bharat Express.

More superfast trains to travel on the soil of Ayodhya. PM Modi also flagged off six new Vande Bharat Trains. These include Shri Mata Vaishno Devi Katra-New Delhi Vande Bharat Express; Amritsar-Delhi Vande Bharat Express; Coimbatore-Bangalore Cantt Vande Bharat Express; Mangalore-Madgaon Vande Bharat Express; Jalna-Mumbai Vande Bharat Express and Ayodhya-Anand Vihar Terminal Vande Bharat Express.

The PM also dedicated three railway projects worth Rs 2300 crore to the nation to strengthen rail infrastructure in the region.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.